Why the iPhone Won't Last Forever and What the Government Should Do to Promote its Successor
Robert W. Hahn
University of Oxford, Smith School; Georgetown University
Hal J. Singer
Navigant Economics LLC
September 1, 2009
Because of the overwhelming, positive response to the iPhone as compared to other smart phones, exclusive agreements between handset makers and wireless carriers have come under increasing scrutiny by regulators and lawmakers. In this paper, we document the myriad revolutions that have occurred in the mobile handset market over the past twenty years. Although casual observers have often claimed that a particular innovation was here to stay, they commonly are proven wrong by unforeseen developments in this fast-changing marketplace. We argue that exclusive agreements can play an important role in helping to ensure that another must-have device will soon come along that will supplant the iPhone, and generate large benefits for consumers. These agreements, which encourage risk taking, increase choice, and frequently lower prices, should be applauded by the government. In contrast, government regulation that would require forced sharing of a successful break-through technology is likely to stifle innovation and hurt consumer welfare.
Number of Pages in PDF File: 30working papers series
Date posted: September 23, 2009 ; Last revised: October 11, 2009
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